Navigating the Rising Costs: Understanding CSU Tuition Increases

The decision to increase tuition at California State University (CSU) is a complex one, influenced by a multitude of factors. Understanding the reasons behind these increases requires a look at the financial pressures facing the CSU system, its commitments to students and employees, and the broader economic landscape of California.

The Multi-Year Revenue Sustainability Plan

In September 2023, the California State University (CSU) Board of Trustees approved a multi-year revenue sustainability plan for systemwide tuition, nonresident tuition, and the graduate business professional program fee. This plan aims to benefit both current and prospective students by providing the necessary resources for each university to further the CSU’s core values of equitable excellence and access, provide tuition stability and predictability for students and parents, and enhance financial aid and affordability for those students with the greatest financial need. The increase takes effect in the 2024-25 academic year, starting with the fall 2024 term.

Addressing a Growing Deficit

The CSU system is facing significant financial challenges, including a budget gap that has grown from $1.5 billion to $2.3 billion. This shortfall is due to a combination of factors, including rising mandatory costs, unfulfilled promises of state funding, and increasing demands on the university system.

Mandatory Costs: The CSU is facing increased expenses in several key areas, including:

Health Care: Staff health care premiums are projected to increase significantly.
Wages: The CSU has committed to wage increases for employees, including union members.
Financial Aid: As tuition increases, the CSU must also increase financial aid to offset the impact on low-income students.
Utilities and Insurance: The costs of utilities and insurance are also rising.

Unfulfilled Promises of State Funding: Some Cal State trustees have expressed frustration that Gov. Gavin Newsom delayed his promises of five years of increasing state support, which was supposed to total more than $1 billion. Only three years of that compact have been funded to date; the fourth, which was supposed to kick in this year, will instead be spread out between 2026 and 2028, lawmakers and Newsom decided in the most recent state budget deal.

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Deferred Maintenance and Construction Needs: The CSU system has about $30 billion in capital maintenance and construction needs.

The Tuition Hike: A Necessary Measure?

To address these financial challenges, the CSU Board of Trustees voted to approve a five-year tuition rate hike, despite vocal opposition from students, faculty, and staff. The vote means that the first annual increase would be $342 to $6,084 for full-time undergraduate students in 2024.

CSU outlined its need for the new revenue from the tuition hike. Without an infusion of cash, the system will have to shift money from some of its initiatives - including improving graduation rates - just to cover mandatory costs, such as health care, insurance, utilities, financial aid and agreed-upon union raises, Cal State leaders said.

The decision to raise tuition was not taken lightly. Trustee Leslie Gilbert-Lurie stated, "This is really a difficult decision for all of us." Interim Chancellor Jolene Koester added, "This will benefit students in the long term and in the years to come."

Commitments to Students and Employees

The CSU system faces demands to improve its Title IX policies and close equity gaps in student academics and graduation rates. It also has enrollment challenges and demands to improve employee compensation and wages, trustee Jack McGrory said. The board also approved a new tuition policy that requires that any future tuition hike be assessed 18 months before it goes into effect and increases institutional financial aid by at least a third of any expected additional revenue received from tuition increases or enrollment growth.

Read also: Tuition and Fees at USC

The CSU is committed to providing financial aid to students who need it. When CSU increases its tuition charges, it intends to set aside a portion of its tuition revenue to provide financial aid to students, also known as institutional financial aid. The largest institutional financial aid program is the State University Grant (SUG) program. SUG generally covers the full cost of tuition for students who have financial need (based upon a federal calculation) but do not receive tuition coverage under the Cal Grant program (such as students in their fifth or sixth year who have used up their four years of Cal Grant eligibility and some graduate students). Currently, SUG provides grants to about 150,000 students.

Alternatives Considered

The CSU has been trying to slow its spending. The chancellor’s office is cutting its budget by $18 million, or 8%, trustees learned at this week’s meeting. Several campuses in the Bay Area are consolidating their administrative offices to lower expenses. Meanwhile, thousands of employees are in a dispute with Cal State leadership over whether their union contracts guarantee them raises this year. Cal State’s leadership says that because state lawmakers reduced the system’s funding by $144 million, they can’t give raises. Unions say because the state is allowing Cal State to borrow that money as a zero-interest loan, the system is fully funded. Cal State says borrowing money isn’t the same as being fully funded by the state. System leaders also lack confidence that the state will restore the $144 million cut next year.

Erin Foote, a vice president for organizing for the union, said in an interview that Cal State leaders should partner with the union in pushing for legislation or a ballot measure to ensure Cal State and University of California have guaranteed funding.

External Factors: State Funding and the Economic Climate

State funding is Cal State’s largest source of funding for its operations. And the system’s tuition revenue jumped from $3.24 billion to $3.53 billion. Next year is projected to be more of the same fiscal hurt.

Some Cal State trustees said they are frustrated that Gov. Gavin Newsom delayed his promises of five years of increasing state support, which was supposed to total more than $1 billion. Only three years of that compact have been funded to date; the fourth, which was supposed to kick in this year, will instead be spread out between 2026 and 2028, lawmakers and Newsom decided in the most recent state budget deal.

Colleges and universities across California are welcoming a new class of freshmen, bringing the reality of the total cost of college home for families paying tuition, room, and board for the first time.

Financial Aid and Affordability

The state has introduced policies and programs to help students address high food and housing costs. For example, CalFresh is a key safety net program available to help certain low-income students afford the cost of food. In addition, in the 2022-23 budget agreement, the legislature amended the Middle Class Scholarship program, allocating funds that link financial aid awards to the total cost of college attendance rather than to tuition costs only. However, a drop in state revenues has led the state to recalibrate the awards formula for other support programs; in particular, the Middle Class Scholarship program for the 2025-26 budget is set at 35% of costs beyond tuition.

A Look at CSU Spending

CSU’s two main sources of core funding are state General Fund and student tuition revenue. General Fund has been growing as a share of CSU’s total core funding while the tuition share has fallen. CSU uses core funding for its core operations. From 2019‑20 through 2024‑25, core spending at CSU increased at an annual average rate of 3.6 percent, slightly lower than the rate of inflation.

CSU’s spending for its core operating expenses increased from $7.3 billion in 2019‑20 to $8.7 billion in 2024‑25 (reflecting a 19 percent increase). Though spending has increased, it has not outpaced inflation. Specifically, in 2024‑25, CSU’s actual core spending was slightly lower than it would have been had it simply kept pace with inflation since 2019‑20. Overall, core spending at CSU has increased at an annual average rate of 3.6 percent over this period.

Employee Compensation

From 2019‑20 to 2024‑25, CSU Has Provided Salary Increases Almost Every Year. CSU’s spending for salaries increased by $805 million (23 percent) between 2019‑20 and 2024‑25, slightly outpacing inflation. The bulk of this spending increase is due to salary increases. In 2023‑24 and 2024‑25, CSU generally provided 5 percent salary increases. Salary negotiations for 2025‑26 are currently open for all unions. Nonrepresented employees, however, received one‑time salary increases in 2025‑26 (equivalent to 3 percent of their annualized salary as of November 2025).

Increased spending on employee health benefits is also contributing to rising compensation costs. CSU’s total spending on employee health care costs has been increasing over time, reaching $779 million in 2024‑25. Growth in health care costs has been particularly notable the past three years (with the highest growth in 2023‑24 at 10 percent).

Recommendations and Future Outlook

The Governor proposes to increase ongoing base General Fund support for CSU by $366 million (7 percent) in 2026‑27 and assumes CSU will collect an additional $201 million in student tuition revenue. The Governor’s budget maintains the enrollment expectation set forth in the 2025‑26 Budget Act, which specify that CSU is to grow resident undergraduate enrollment by 10,161 full‑time equivalent (FTE) students (2.9 percent) in 2026‑27.

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